Monday, 4 September 2017

Oil Price Forecast? 'Up' or 'Down' Would be Nice

Writing as someone whose willingness to be tempted to say stuff about future oil prices has (rightly) been mocked, I had to smile at these two adjacent headlines:

Oil Price: Hurricane Harvey Is A Disaster For OPEC ... refinery outages could eat into crude oil demand for quite some time: Goldman says that the supply outages could be outweighed by the destruction of demand.

Reuters: Harvey may succeed where OPEC has struggled by boosting oil prices... according to a report from S&P Global Platts, onshore shale oil output was in the storm’s path ... and producers in the region have idled production.

See - nobody knows! And that's before Fat Boy exploded his H-bomb: stew that one in! The Beeb is in on it, too:

Why economic forecasting has always been a flawed science: Radio 4 examines why experts often get predictions wrong – and meets the people who get them right

More like they met a handful of stopped clocks who presumably told the time correctly on a couple of occasions. Nope: 'experts' can't even agree on up or down (and when they do, it's probably time to go contrarian). There are many, many reasons to agree with Keynes, Galbraith and Drucker that price-forecasting based on 'fundamental analysis' or similar is not intellectually respectable. That's quite apart from its track record being diabolical.

Still, people believing in forecasts are what makes the world go round. The bookie always has a deal for you ... and all those spec assets become sunk costs. Well - someone had to build the railways.

Thought I'd better order the winter heating oil today, before things get hairier.

I must say I hadn't realised when the Norks fired over Hokkaido that the Japanese, Americans and SouthKs had just finished large-scale military exercises there and in South Korea - exercises aimed at NK.

dearieme, that LRB article is about the NK September 2016 test, not the latest one - it was published 3 weeks ago.

NK says the latest was of a variable yield "two-stage thermo-nuclear weapon", adjustable from "tens kiloton to hundreds kiloton". Somewhat like the UK's last nuclear bomb, the variable yield WE.177, which ranged from 0.5 kilotons (tactical or shallow depth bomb mode) to ~450 kilotons.

It is probably both boosted and a H-bomb, giving at least three variable yield modes: primary unboosted, primary boosted, full two stage thermonuclear. It looks like the test was at around ~120 kilotons, so maybe there is also an option with a larger secondary. From the photos it isn't as compact as the most modern western designs, so they may go for another design iteration for a better long range ICBM warhead. They have become pretty smart cookies over the years in nuclear and missiles - technically maybe in advance of Pakistan and India.

It rightly hedges a bit on if it is boosted or H-bomb - a well designed boosted weapon could do 120 kt. But I find the photos and explicit claim convincing, as the U.S. may well be able to work it out from gas sampling, and I doubt NK wants to lose credibility here.